Fibonacci Confluence in the NASDAQ May 1

May 1, 2009: 11:15 AM CST

Let’s take a quick look at the levels of Fibonacci Confluence in the NASDAQ Index as we start May, 2009.

The Fibonacci grids I’ve drawn begin at the 1,280 March low level and connect three key swing highs – the colored retracements are the result of these levels and we are looking at the confluence price zones identified by these overlapping grids.

The most significant confluence zone comes in at the 2,050 level, with the next confluence zone coming in at the 1,900 level.  Notice the ‘open air’ between these zones. The implication is that if price breaks above one of these zones, odds are it will run up to the next zone of confluence for possible resistance.

We are currently in an area of overhead confluence Fibonacci resistance at the 1,750 level, as price tested this level and currently is failing to overcome the 38.2% Confluence area.  With eight consecutive weeks of gains, it would be distinctly against the odds to see a ninth and tenth week (and beyond) of gains.

That’s not to say that it can’t happen or that bulls can’t push us through the Fibonacci confluence levels, but the odds are overwhelmingly stacked against them and that risk clearly remains to the upside (odds favor an inflection or retracement down off resistance rather than breaking through it).

This chart represents a quick glance at Fibonacci confluence.  Continue studying the chart for additional insights going forward.

Corey Rosenbloom, CMT
Afraid to Trade.com

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4 Comments

4 Responses to “Fibonacci Confluence in the NASDAQ May 1”

  1. Bob Says:

    This Fib analysis is right on… Good food for thought. I must keep in mind, these levels of confluence aren’t absolutes, but hint at probability and hopefully help improve our odds.

    Of the NASDQ, S&P 500 and DJIA, the tech sector is certainly showing the greatest strength. If this sector were to pull-back from this current resistence zone, it would underscore the fragility of the markets. While I anticipate a pull-back soon, which makes absolute rational sense, it won’t surprise me if the NASDAQ pushes up through the current confluence zone and makes it to the 50% retracement level. Such a move would reinforce the strenght of this sector.

    Consider that the NASDAQ is heavily weighted by some real tech giants (GOOG, RIMM, AAPL, etc.) and while these companies have experienced difficulty in this economic downturn, they have been relative bell-weathers. Most notibly, they continue to grind out impressive earnings, and money is steadily flowing into these stocks. The trend since March is higher highs and higher lows.

    Another factor to consider is sector rotation. It’s understood that certain stocks perform best at distinct moments in a business cycle. We are entering a period in the business cycle where one would expect a rotational shift out of companies like PG, JNJ, WMT, etc. and into tech.

    Hmmmmm.

    Bob

  2. Corey Rosenbloom Says:

    Bob,

    Precisely – it would be nice if all Fibonacci confluences ‘worked!’

    I think you also hit it that a pullback here would make ‘rational’ sense just from a price over-extension or ‘over-reach’ but the market doesn’t have to be logical – it can be endlessly frustrating at times.

    I just put up a post on Sector Rotation this morning which is now available. SR analysis shows bullishness.

  3. jason in charlotte Says:

    Great post.

    I find fibonacci confluences (of varying type) to be one of the most interesting technical phenomena.

  4. Corey Rosenbloom Says:

    Jason,

    Same here! They help reveal hidden support and resistance others might not be seeing.